Supreme Court Clarifies GST Exemption for Residential Dwellings Sub-let as Hostels
In a significant ruling, the Supreme Court of India in the case of State of Karnataka v. Taghar Vasudeva Ambrish [2025] 181 taxmann.com 199 (SC) dated December 4, 2025, has provided clarity on the GST exemption for renting residential dwellings. The Court affirmed that a co-owned residential building leased to a company that subsequently sub-let rooms as hostels for long-term stays (3 to 12 months) to students and working professionals qualifies as a 'residential dwelling'.
The apex court held that the exemption under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate) could not be denied. The critical condition of 'use as residence' was satisfied by the sub-lessees, making the exemption activity-specific rather than person-specific. Furthermore, the Court clarified that amendments to Notification No. 9/2017-IGST (Rate) that denied exemption to registered persons for letting were only prospective (effective from July 18, 2022). Therefore, for the pre-amendment period (2019-2022), the exemption remained available under the unamended Entry 13, and retrospective denial was impermissible. This decision provides much-needed relief and clarity for property owners engaged in similar rental arrangements.
